I believed, incorrectly, that for you to build a profitable business, you were required to know everything about the business. You needed an MBA from a prestigious university, and you were an expert in:

Business Creation

Value-Creation & Testing

Marketing

Sales

etc.

But over the course of many failures, I began to understand that obtaining expertise is more of a popularity contest, instead you should be developing the insight to solve interesting problems. I have found that the people who are labeled ”so good” are given that title, not because of their expertise but because they have mastered certain principles.

Charlie Munger’s Devotion to Mental Models

What are these principles: the thorough understanding of a few essential concepts that provide significant value. How do you then go about learning these principles? You must develop mental models. Josh Kaufman, the author of the Personal MBA shares:

”Mental model are concepts that represent your understanding of how things work.”

When you understand how business works, you can quickly build mental prototypes to test your preliminary ideas against the problem, and quickly iterate until you find the solution.

Warren Buffet states, ”Charlie can analyze and evaluate any kind of deal faster and more accurately than any man alive. He sees any valid weakness in sixty seconds. He’s the perfect partner.”

Buffet is describing his business partner Charlie Munger, who shares:

“I’ve long believed that a certain system - which almost any intelligent person can learn - works way better than the systems most people use [to understand the world]. What you need is a latticework of mental models in your head. And, with that system, things gradually fit together in a way that enhances cognition.”

Munger continues:

”Just as multiple factors shape every system, multiple mental models from a variety of disciplines are necessary to understand that system… You have to realize the truth of biologist Julian Huxley’s idea that, “Life is just one damn relatedness after another.” So you must see the relatedness and effects from the relatedness.”

The Backdoor to Your Mental Models

So how do you build these multiple mental models? You read. You focus on big disciplines:

Physics — Seven Brief Lessons On Physics by Carlo Rovelli

Biology — The Origin of Species by Charles Darwin

Psychology — Mindset by Carol S. Dweck

Philosophy — Meditations by Marcus Aurelius

Literature — Upstream by Mary Oliver

Sociology — Man’s Search for Meaning by Victor E. Frankl

History — Sapiens by Yuval Noah Harari

Business — The Personal MBA by Josh Kaufman

The books listed are recommendations but they are a good starting point. You are not looking for expertise in these disciplines, you are working towards mastery, and by mastery, I mean leveraging your new mental models to solve interesting problems.

Building a latticework of mental models does not mean you will become the next Charlie Munger, the hope sits squarely on you being able to enhance cognition so you can see the relatedness of the solutions and apply them to the problem.

I maintained a mental model that business was an intricate lattice of failures, products, debt and human capital. Why, because I spent little time in educating myself on how business works. Not to mention the traditional idea that “business is complicated” and its management is best left to the MBAs.

In The Personal MBA: Master the Art of Business, Josh Kaufman explains that business is not complicated at all:

At the core, every business is fundamentally a collection of five Interdependent processes, each of which flows into the next:

Value Creation. Discovering what people need or want, then creating it.

Marketing. Attracting attention and building demand for what you’ve created.

Finance. Bringing in enough money to keep going and make your effort worthwhile.

In essence, the mental model that you have been force fed is a lie. Business is not complicated nor does it require an MBA at the helm. Principally, business is leveraging people and systems in a repeatable process that delivers value for allot of paying customers.

How do you learn about the processes without attending a fancy graduate school, you can start by reading:

The Personal MBA: Master the Art of Business by Josh Kaufman

Go It Alone by Bruce Judson

The Lean Startup by Eric Ries

Street Smarts by Norm Brodsky & Bo Burlingham

Ready, Fire, Aim by Michael Masterson

Escape from Cubicle Nation by Pamela Slim

Bankable Business Plans by Edward Rogoff

These seven books will give you a fundamental understanding of how to build a profitable business.

Kaufman continues to share:

”Business is not (and has never been) rocket science— it’s simply a process of identifying a problem and finding a way to solve it that benefits both parties. Anyone who tries to make business sound more complicated than this is either trying to impress you or trying to sell you something you don’t need.”

So why isn’t everyone starting a business? Simple, most people don’t have the education on how to make a business profitable. They don’t understand how to create value, market, sell, deliver value and most importantly manage cash flow. If you want to start a business, then you must educate yourself on how to start a business: that is the new mental model.